Is GameFi subject to the same market forces as the traditional gaming industry?

Web2 Games and GameFi may differ in several key areas, but many of the market forces that will dictate their success or failure are very similar—at least according to several experts who spoke to Cointelegraph.

Games in the Web2 market are governed by market demand, profitability, consumer purchasing power, and competition among game developers, with a handful of large developers and manufacturers dominating large games. All of these factors contribute to the success or failure of a title in the mainstream market.

Speaking to Cointelegraph, Andy Koh, CEO of GMS, said that fundamentally, GameFi is subject to many of the same market forces that govern its success or failure in the mainstream market. One key factor in particular is maintaining a strong player base.

“Gameplay, graphics, immersive experiences, and active community pillars remain critical in both Web2 and Web3 games,” he said.

“The web3 game industry needs to acknowledge that without a community of players, any game, whether traditional or blockchain-based, will face challenges in terms of sustainable success and optimal NFT or token sales.”

GameFi uses elements from the Web2 gaming marketplace to combine traditional game elements with blockchain technology to allow ownership of in-game items and rewards through digital assets.

GameFi titles generally focus on creating a stable and sustainable environment based on digital assets and aim for long-term growth. Many Web2 games focus more on external forces, such as new releases replacing the originals.

Steam is one of the most popular online platforms for traditional games. According to data aggregation platform Statista, more than 73,000 games will be available on Steam by 2024. Last year alone, 14,457 games were added to the library, up from 12,533 the year before.

Koh thinks that Web3 games, and GameFi in general, need a small and subtle change to survive long-term, away from its core focus.

Like Koh, many blockchain and Web3 game founders understand the key factors necessary for long-term sustainability and success. However, they can sometimes end up pleasing investors, leading to huge marketing budgets that are often misallocated, sometimes at the expense of actual game development.

“From 2021 to 2023, there was a significant focus on NFT plays, covering the important aspect of acquiring dedicated players.”

“Long-term sustainability remains a very difficult challenge, especially when the main focus is on building and refining the game. It is important to maintain a balance between satisfying the needs of investors and ensuring the longevity of the project,” he said.

All games are governed by adherence and profitability.

Roy Keck, founder and CEO of Singaporean gaming and publishing company Emerge Group, told Cointelegraph that Web2 and Web3 are governed by the same market forces and measures for success.

“Ultimately, regardless of whether the game is Web2 or Web3, prioritizing fun gameplay, community building, and effective user retention methods will be critical,” he said.

The key factor he thinks will dominate both industries is “stickiness.” Stickiness refers to how often users return to an app or game. “Once a game sticks, there are many ways to succeed,” Keck said.

Related: GameFi Opportunities and Challenges in 2024

Monetization is critical to the profitability and business success of Web 2 Games and GameFi. Monetization has become a big part of the Web2 market in recent years. Features such as in-game purchases, premium paid downloads, and ongoing subscriptions have become commonplace to aid profitability.

According to Keck, Web3 games should follow the same path but do so much better than their Web2 counterparts, using additional monetization options unique to GameFi.

Specifically, he mentions token positioning, which positions tokens as a valuable commodity in the gaming ecosystem, and NFTs, which can represent unique in-game assets that players can own, trade, or sell.

“Free-to-play Web2 games rely heavily on in-game item sales for monetization, but there's a lot of room for creativity in monetizing Web3 games,” he said.

Speaking to Cointelegraph, John Schneider, co-founder and CEO of GameFi's ecosystem platform Axin, thinks GameFi still hasn't significantly overhauled the traditional game industry business model, leaving it exposed to similar market forces.

“For most GameFi projects, it's important to establish a solid foundational business model based on existing and proven value streams,” he said.

“The majority of users are in traditional platforms like the Apple App Store, Google Play Store, and Steam, which currently impose limitations on blockchain integration.”

Web3 developers have been saying that the mainstream market is critical to the success of the GameFi market in the long term.

Overall, there are more than 3 billion Web2 players worldwide as of 2023, according to Blast Topics. Most of them are considered casual players who play regularly but don't contribute often.

GameFi may not need a wide player base.

Mohsin Waqar, CEO of Web3 gaming platform Senate, agrees that player numbers are critical to the success of traditional games and GameFi. However, he thinks “the dynamics in the GameFi space are more multifaceted.”

“For example, AAA game studios rely on these metrics to measure popularity and revenue potential, and in most cases, they are the primary indicators used to determine success,” Cointelegraph said.

“Success in GameFi is not determined by these metrics alone, but depends on the viability of token economies, liquidity pools, and community engagement strategies.”

According to Waqar, unlike traditional game revenue streams – which mainly originate from direct sales, in-game purchases or microtransactions – GameFi projects often involve decentralized financing mechanisms, such as tokennomics, liquidity pools and product farming.

Related: ‘Tens of millions' to enter Web3 in gaming by 2024 – GameFi execs

In addition, player management is more focused, he said, meaning that gamify projects can be developed as long as player counts are lower than traditional titles and players are involved as active stakeholders.

However, at the same time, Waqar still believes that one guiding principle rules over both industries.

“From a broader perspective, Web3 game developers, GameFi developers are beginning to realize that the player's enjoyment and gameplay is still and always the focal point of the player experience,” he said.